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A user is considering whether to lease or purchase a 50,000-square-foot, free-standing building. The user is a corporation whose tax rate is 21 percent for all sources of income. The corporation's after-tax discount rate is 9 percent. The following T-bars are the result of an after-tax analysis performed to assist the corporation in making the decision to lease or own the building. Minus Lease Equals Differential ΕΟΥ Purchase 0 ($972,000) ($132,531) ($132,901) 3 ($134,258) ($135,727) ($137,318) 6 ($139,041) 7 ($140,908) 8 ($142,929) 9 ($145,117) 10 ($148,370) + $1,516,391 $0 ($972,000) ($158,400) $25,869 ($158,400) $25,499 ($158,400) $24,142 ($158,400) $22,673 ($158,400) $21,082 ($166,320) $27,279 ($166,320) $25,412 ($166,320) $23,391 ($166,320) $21,203 ($166,320) $1,534,341 What is the after-tax present cost of occupancy for the lease alternative? $1.534.341 X A 30

A user is considering whether to lease or purchase a 50,000-square-foot, free-standing building. The user is a corporation whose tax rate is 21 percent for all sources of income. The corporation's after-tax discount rate is 9 percent. The following T-bars are the result of an after-tax analysis performed to assist the corporation in making the decision to lease or own the building. Minus Lease Equals Differential ΕΟΥ Purchase 0 ($972,000) ($132,531) ($132,901) 3 ($134,258) ($135,727) ($137,318) 6 ($139,041) 7 ($140,908) 8 ($142,929) 9 ($145,117) 10 ($148,370) + $1,516,391 $0 ($972,000) ($158,400) $25,869 ($158,400) $25,499 ($158,400) $24,142 ($158,400) $22,673 ($158,400) $21,082 ($166,320) $27,279 ($166,320) $25,412 ($166,320) $23,391 ($166,320) $21,203 ($166,320) $1,534,341 What is the after-tax present cost of occupancy for the lease alternative? $1.534.341 X A 30

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A user is considering whether to lease or purchase a 50,000-square-foot, free-standing building. The user is a corporation whose tax rate is 21 percent for all sources of income. The corporation's after-tax discount rate is 9 percent. The following T-bars are the result of an after-tax analysis performed to assist the corporation in making the decision to lease or own the building. Minus Lease Equals Differential ΕΟΥ Purchase 0 ($972,000) ($132,531) ($132,901) 3 ($134,258) ($135,727) ($137,318) 6 ($139,041) 7 ($140,908) 8 ($142,929) 9 ($145,117) 10 ($148,370) + $1,516,391 $0 ($972,000) ($158,400) $25,869 ($158,400) $25,499 ($158,400) $24,142 ($158,400) $22,673 ($158,400) $21,082 ($166,320) $27,279 ($166,320) $25,412 ($166,320) $23,391 ($166,320) $21,203 ($166,320) $1,534,341 What is the after-tax present cost of occupancy for the lease alternative? $1.534.341 X A 30
Transcribed Image Text:A user is considering whether to lease or purchase a 50,000-square-foot, free-standing building. The user is a corporation whose tax rate is 21 percent for all sources of income. The corporation's after-tax discount rate is 9 percent. The following T-bars are the result of an after-tax analysis performed to assist the corporation in making the decision to lease or own the building. Minus Lease Equals Differential ΕΟΥ Purchase 0 ($972,000) ($132,531) ($132,901) 3 ($134,258) ($135,727) ($137,318) 6 ($139,041) 7 ($140,908) 8 ($142,929) 9 ($145,117) 10 ($148,370) + $1,516,391 $0 ($972,000) ($158,400) $25,869 ($158,400) $25,499 ($158,400) $24,142 ($158,400) $22,673 ($158,400) $21,082 ($166,320) $27,279 ($166,320) $25,412 ($166,320) $23,391 ($166,320) $21,203 ($166,320) $1,534,341 What is the after-tax present cost of occupancy for the lease alternative? $1.534.341 X A 30
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